July 31, 2018
Dr. Gajendra Singh is suing to overturn North Carolina’s “certificate of need” law.
Dr. Gajendra Singh walked out of his local hospital’s outpatient department last year, having been told an ultrasound for some vague abdominal pain he was feeling would cost $1,200 or so, and decided enough was enough. If he was balking at the price of a routine medical scan, what must people who weren’t well-paid medical professionals be thinking?
The India-born surgeon decided he would open his own imaging center in Winston-Salem, North Carolina, and charge a lot less. Singh launched his business in August and decided to post his prices, as low as $500 for an MRI, on a banner outside the office building and on his website.
There was just one barrier to fully realizing his vision: a North Carolina law that he and his lawyers argue essentially gives hospitals a monopoly over MRI scans and other services.
Singh ran into the state’s “certificate of need” law, which prohibited him from buying a permanent MRI machine, which meant his office couldn’t always offer patients one of the most important imaging services in medicine. He has resorted to renting a mobile MRI machine a couple of days a week. But it will cost him a lot more over time than a permanent machine would, and five days a week, his office can’t perform MRIs.
Now Singh has had enough. He filed a lawsuit Monday in North Carolina Superior Court to overturn the state law, news that he and his attorneys from the Institute for Justice shared exclusively with Vox.
Singh specializes in complex liver transplants and surgeries to treat gastrointestinal cancers. He appreciates the importance of a good MRI. “Those patients need imaging. As a surgeon, we need to see what we’re going to do. We often need a lot of imaging,” he told me in a phone interview.
As Vox’s Sarah Kliff reported as part of her project to collect emergency room bills, Americans can sometimes be charged as much as $24,000 if they get an MRI at a hospital’s ER. Singh is offering a substantial discount on a medical service plagued by high costs.
But because his office can only offer MRIs twice a week, they must regularly turn away patients who need them — some of whom shouldn’t wait to get important medical scans.
“We lose all those patients,” said Singh, who also owns his own surgery practice.
Certificate-of-need laws were in vogue 40 years ago. But lawmakers quickly discovered that, in practice, they often served to protect hospitals from competition. Forty-nine states had such a statute at one time, but in the decades since, 14 states have repealed theirs.
Singh wants to make North Carolina the next one. He says if he prevails, and he’s able to purchase a permanent MRI, he hopes it will bring in more money for his center — and then, he says, he can lower prices more.
“If I wanted to just have money, I didn’t have to do all this stuff,” he said. “Do I want to make money? Absolutely. But I didn’t open this imaging center to buy a Lamborghini.”
The history of certificate-of-need laws, explained
Under North Carolina’s law, a medical provider must obtain a government permit (a “certificate of need”) if they want to offer certain new services or buy new equipment. But first, every year, state officials will make a determination about whether certain services are needed in different places.
If the state has decided an area doesn’t need a service, then other providers are barred from even applying for a permit. That is what Singh ran into: He wasn’t allowed to apply to purchase a permanent MRI for his Winston-Salem center. State officials had already decided it wasn’t needed there.
Even if he could apply, other providers in the area could contest his application. Singh’s attorneys estimate the entire process of applying for and defending a certificate of need can cost up to $400,000 and last as long as three years. A permanent MRI machine would cost Singh less than $750,000.
“There has not been a single instant that it has gone uncontested,” Renée Flaherty, one of Singh’s attorneys from the Institute for Justice, told me.
CON laws started popping up in the 1960s, and in 1974, Congress made them or less standard by linking federal funding to states adopting such a law. Louisiana was the only state that didn’t. They were well-intentioned, with the goal of exercising strong oversight of new health care providers.